Nonprofit Funding 2025: Navigating the New Area of Uncertain Federal Funding

Just as natural disasters strike without warning and disrupt entire communities, recent executive orders have shaken the nonprofit sector, creating sudden and far-reaching uncertainty in federal funding.

The nonprofit landscape has faced significant disruption since the beginning of the year due to executive orders that have rescinded, reduced, or delayed existing federal funding. Across the country, hundreds of millions of dollars earmarked for nonprofit programs have been cut or frozen as federal directives target areas such as diversity, equity, and inclusion (DEI), immigration services, sanctuary city funding, foreign aid, scientific research, education, the arts, and other core pillars of nonprofit work.

With federal funding up in the air, nonprofits need to act quickly and thoughtfully. It’s a bit like picking up the pieces after a storm—figuring out what’s been lost, what still works, and what you need to keep doing. Taking a good look at where things stand now will help you plan your next moves and stay focused on your mission. Nonprofits should consider these potential actions:

• Review your Federal grant/contract terms: The terms within Federal grants and contracts should provide detail on when termination of a contract is allowed. If not in the grant or contract, such terms may be included within the application documents. Understanding your rights and obligations can be key if funding is pulled unexpectedly. Always consult legal counsel before pursuing any legal action. Additional information and resources on steps that can be taken are publicly available,  such as on the Council of Nonprofits.
• Increase fundraising efforts: Organizations should find ways to reach broader audiences. While Federal funding may be reduced or eliminated, new funding may be available through State and local agencies. Additionally, as seen in the aftermath of natural disasters, individuals, corporations, and other philanthropists may be willing to provide funding for causes they are sympathetic to, even if they are experiencing reduced discretionary income. The method for reaching the broader audience may also play a vital role. Starting or increasing social media presence, for example, may be a low-cost way to appeal to donors that may also reach a greater audience than traditional email or fundraising events.
• Seek new funding sources: Relying solely on fundraising may not be sustainable in the current environment. Nonprofits should consider alternative options such as low-interest loans, lines of credit, public-private partnerships, earned income strategies (selling mission-aligned services or goods), fiscal sponsorships or rental/shared space income. Exploring a mix of short-term and long-term funding models can help build resilience and reduce dependency on any single source funding.
• Do not forget your employees: Employees are impacted as much as the organization itself. Morale can drop due to fears about layoffs, program cuts, or the organization’s future. Being open and honest about the situation and plans helps reduce anxiety and fosters unity. Encouraging two-way communication can also uncover valuable ideas from those working day-to-day programs on how to navigate challenges.
• Adjust financial reporting: While accounting and financial reporting may not be top of mind in times of uncertainties, presenting an accurate financial picture may play a large role in communicating an organization’s situation and needs to potential funders. Areas most likely needing attention include:
  • Assessing the need for an allowance for doubtful grants and contributions receivable and distinguishing between delayed payments versus funding that may be permanently rescinded.
  • Assessing the need to adjust financial statements for potential disclosures regarding the significant impact to funding and receivables, subsequent events or risks and uncertainties for potential impacts on operations, financial results, and/or future cash flows, and, in some cases, doubt regarding the ability to continue as a going concern.

Plan for the Future

Planning ahead is essential because future crises are unpredictable, and preparedness helps build resilience. A few ways this can be done are as follows:

• Save and invest: Maintaining cashflow is key. Organizations should find ways to put money aside and to earn money on idle cash. Creating reserves, such as Board reserves, helps retain cash for future use. Finding safe investments and similar instruments that can provide return on funds, can also help grow an organization’s reserves. A trusted financial advisor in this arena may be more important than ever, to help invest and grow reserve funds.
• Cash flow and scenario planning: Organizations may need to adopt for-profit practices to enhance agility and better prepare for future crises. Cash flow projections and forward-looking scenario planning are essential tools for developing emergency plans that are ready to implement.
• Shift or realign mission focus and operations: Nonprofits should consider reassessing their mission and programs to build greater resilience. Whether temporarily or permanently, shifting focus away from known risks can help prevent future losses. While a complete shift may not be possible for organizations that are fully committed to their current mission, strengthening operations without an overhaul, such as cross-training employees across programs or departments, can protect against skill loss if cuts become necessary. Additionally, reviewing and updating language in mission statements, websites or other public documents can help avoid wording that might make your organization vulnerable to restrictive executive orders or legislation targeting specific activities or groups.

Conclusion

In an environment of ongoing uncertainty around federal funding, nonprofits must remain proactive and adaptable. Taking a fresh look at your mission, building up your team’s skills, and keeping your plans clear can go a long way. Staying prepared and open to changes ensures you can keep doing the good work your community counts on, no matter what comes next. Please contact us if you have any questions about funding your organization.

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